Federal exchanges said to induce consumers to overspend on health coverage

Limitations with how the federally-run health insurance exchanges present information misleads consumers and induces them to spend many thousands of dollars a year more than necessary on health coverage, according to Consumers’ Checkbook, a non-profit consumer advocacy organization and web site.

To illustrate the problem, Checkbook cites the way in which insurance options for a family of four in Chicago are presented on the federally-operated Illinois insurance exchange. Such a family is shown a list of 65 health plans ranked by premium cost, after adjustment for the tax credit subsidy the family can expect. First on the list is a bronze plan with a monthly premium of $93—far less than the $222 monthly premium for the same insurer’s silver plan much farther down the list.

But the bronze plan, which, Checkbook argues, based on its price and prominence the family is much more likely to choose, is likely to cost the family about $2,500 more per year than the silver plan —as determined by an actuarial estimate of out-of-pocket costs for deductibles, co-payments, and coinsurance.

"A consumer just can't figure out: Is a plan with the $200 deductible and a $10,000 out-of-pocket limit better for me than a plan with a $2,000 deductible and $4,000 out-of-pocket limit," says Checkbook president Robert Krughoff. "Even health insurance experts can't figure that out. People don't know how much services cost or their likelihood of needing different services."

To demonstrate how the exchanges could provide more meaningful cost comparisons for consumers, Checkbook created an alternate model website, www.healthplanratings.org, which the advocacy group says could be replicated or imitated by any state exchange. For each plan listed, the site shows:

• An actuarial estimate of the plan’s average total cost including the premium plus out-of-pocket expenses for a comparable individual or family, as determined by age, health status, family size and other characteristics.
• The plan’s cost if consumer makes above average use of health services in a given year.
• An overall measure of the quality of care and service provided by the plan.
• The types and names of doctors covered by the plan.

"For consumers to choose health plans that will save them money, the task of comparing costs with different plans needs to be made as simple as possible. The Consumers' Checkbook approach of combining premium and an actuarial estimate of the consumer's average out-of-pocket costs into a single number for each plan makes meaningful comparison easy," says Joel Ario, a managing director at Manatt Health Solutions and a former director of the Department of Health and Human Services’ Office of Health Insurance Exchanges. 
Consumers’ Checkbook and The Center for the Study of Services is an independent, nonprofit consumer organization founded in 1974 with the help of funding from the U.S. Office of Consumer Affairs. It is supported entirely by consumer subscription payments and donations and by fees for survey and information services.